Page 115 - Pakistan Oilfields Limited - Annual Report 2021

Following are the key audit matters:

S.No. Key Audit Matters How the matter was addressed in our audit
(i) Analysis of impairment of development and
decommissioning costs and exploration
and evaluation assets
(Refer note 13 and 14 to the financial statements)

As at June 30, 2021, the development and Our audit procedures in relation to management’s
decommissioning costs amounted to Rs 13,672 impairment test, amongst others, included the
million and exploration and evaluation assets following:
amounted to Rs 512 million. • Assessed the methodology used by

The Company assesses at the end of each management to estimate value in use of each
reporting period whether there is any indication CGU;
that a Cash Generating Unit (CGU) may be • Assessed the assumptions of cash flow
impaired. projections in calculation of the value in use of
Where impairment indicator is triggered for any CGUs, challenging the reasonableness of key
CGU, an impairment test is performed by the assumptions i.e. oil and gas reserves, oil and gas
Company based on estimates of the value in use prices, production costs, foreign exchange rates
of that CGU. and discount rates based on our knowledge of
The calculation of value in use of development the business and industry by comparing the
and decommissioning costs requires the assumptions to historical results, and published
exercise of significant management’s estimates market and industry data;
and judgements on certain assumptions such • Assessed the impairment indicators as per IFRS
as (i) estimation of the volume of oil and gas 6 “Exploration for and Evaluation of Mineral
recoverable reserves; (ii) estimation of future oil Resources” for material balances included in
and gas prices; (iii) cost profiles and inflation exploration and evaluation assets;
applied; (iv) foreign exchange rates; and (v) • Performed sensitivity analysis in consideration
discount rates. of the potential impact of reasonably possible
We considered this matter as key audit matter downside changes in assumptions relating
due to significant value of the related assets to oil and gas prices, discount rate and other
at reporting date and due to significance of assumptions and;
judgements used by management. • Assessed the appropriateness of disclosures

made in the financial statements.

ANNUAL REPORT 2021 113